No ‘mere servant’: The evolving role of the company secretary.

Discussion on company law and corporate governance tends to focus on the role of the board of directors, the shareholders, the creditors, and the auditor, but surprisingly little attention is paid to company secretaries. Indeed, outside of the corporate sector, it is likely that many people would never have heard of the office of company secretary and, of those who have, it is common to misunderstand the role due to the word ‘secretary’ in the title. Their role is, however, an extremely important one, with a 2014 report entitled The Company Secretary: Building Trust Through Governance,stating that the CEO, chairman, and company secretary form “the triumvirate at the top.”

The starting point is the law relating to the appointment of the company secretary (hereafter referred to as the “secretary”). Under the now-repealed Companies Act 1985, all companies were required to appoint a secretary. Section 271 of the Companies Act 2006 states that public companies are required to appoint a secretary. Section 270, controversially, states that private companies (which account for around 99.6% of all registered companies) are not required to appoint a secretary, but may do if they so wish. This has led to concerns that the role of the secretary has been downplayed, and that private companies, the vast majority of which are small businesses, are exactly the types of business that would benefit most from the services of a secretary. This is a view that appears to have prevailed in Ireland, as the Irish Companies Act 2014 mandates that all companies must appoint a suitably qualified secretary (further providing that if a company only has one director, then that person may not also hold the office of secretary).

The role of the secretary is not statutorily defined, nor does the Companies Act 2006 actually provide any tasks that must be undertaken by the secretary (although it does establish that officers of the company, which would include the secretary, can be liable if certain obligations are not met). The precise role and powers of the secretary are a matter of agreement between the company and the secretary. Historically, the role of the secretary was limited. In the 1887 case of Barnett, Hoares & Co v South London Tramways Co (1887) 18 QBD 815, Lord Esher MR described the secretary as “a mere servant” who must “do what he is told.” This led to the secretary being primarily viewed as an administrator, who would engage in tasks such as ensuring the filing of documents at Companies House, maintaining the statutory registers, preparing the agenda and minutes of board/general meetings, and ensuring that general meetings are conducted in accordance with the procedures established in the Companies Act 2006 (tasks that are still undertaken by many secretaries today).

As time progressed, however, the work undertaken by the secretary broadened and increased in importance. This was, to a degree, recognised in the case of Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 (CA), where Lord Denning MR stated that:

“[T]imes have changed. A company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities. This appears not only in the modern Companies Acts, but also by the role which he plays in the day-to-day business of companies. He is no longer a mere clerk. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day running of the company’s business…. He is certainly entitled to sign contracts connected with the administrative side of a company’s affairs, such as employing staff, and ordering cars, and so forth.”

Lord Denning MR acknowledged that, in the decades prior to the case, the role of the secretary had grown into becoming one of the most important within the company. However, he still viewed the role of the secretary as broadly administrative, and the law’s view of the secretary’s role has not changed since then. This is despite the fact that there can be little doubt that the role of the company secretary has broadened considerably, especially in larger companies. This is evidenced in a number of ways.

First, a 2012 report published by the All Party Parliamentary Corporate Governance Group found that around 70% of FTSE 100 companies combined the role of secretary with some other role. In over 50% of cases, the most common role was that of Head of Legal/General Counsel, an extremely important role (although one that many argue is not compatible with the role of the secretary). Second, it is clear that the secretaries’ perception of their role has changed. The same report found that only 25% of secretaries questioned regarded their role as administrative – 33% characterized the role as strategic, and 42% characterized it as a mixture of the two. However, the exact role of the secretary will depend upon the views of the board, and 71% of directors viewed the secretary’s role as being administrative, with only 10% viewing the role as strategic. Despite this disparity, there was broad agreement that the responsibilities of the secretary had increased over the previous five years, with 71% of secretaries and 45% of directors opining that the secretary’s role will continue to increase over the next five years.

In conclusion, there can be little doubt that the role of the company secretary (especially in larger companies) is evolving beyond the administrative, and is increasingly becoming more strategic and compliance-focussed. However, the law still has little to say regarding the role of the company secretary. Perhaps this is a reflection of the disparity of thought that exists between secretaries and directors, and the desire to allow companies to define the secretary’s role. What is certain is that the role of secretary is one of the most important in the company, and perhaps the time has come for UK company law to fully recognise more the importance of the company secretary.

This post was originally published in May 2016 as part of the OUP Blog.

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